Gas Prices Hit Four-Year Low - Potential for Further Decline

Gasoline prices in Sweden have reached their lowest levels in four years, with current rates hovering just above 15 kronor per liter. This significant drop follows a period in 2022 when prices occasionally exceeded 24 kronor per liter.

The recent decline can be attributed to a nearly 20% decrease in global crude oil prices this year, alongside a weakened dollar against the Swedish krona, influenced by U.S. trade policies and geopolitical tensions.

As of early May, major fuel retail chains are charging approximately 15.40 kronor per liter for 95-octane gasoline, translating to a little over 920 kronor to fill a standard 60-liter tank. Prices at unmanned stations and discount retailers may be even lower.

In comparison, filling the same tank cost just over 1,100 kronor a year ago, and during the peak prices of 2022, it soared to around 1,450 kronor.

Experts suggest that oil prices could decline further as global trade resumes this week. Christian Kopfer, a commodity analyst at Handelsbanken, notes that the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, has decided to increase production by an additional 411,000 barrels per day in June, following a similar increase in May.

Kopfer describes this situation as an 'oil war,' where the rationale for increased production is to penalize smaller oil-producing countries like Iraq and Kazakhstan, which have benefited from the production cuts by Russia and Saudi Arabia.

However, Kopfer believes that the primary motive for both Russia and Saudi Arabia is to make parts of the U.S. oil production less profitable, especially since U.S. production has reached record levels.

He also points out that while there is limited potential for gasoline prices to drop significantly in Sweden, the theoretical floor price for gasoline is around 11 kronor per liter, regardless of a hypothetical scenario where oil prices fall to zero. This limitation is primarily due to taxes, fees, and necessary profit margins for refineries, transportation companies, and gas stations.

Ultimately, the extent to which gasoline prices can continue to fall will largely depend on fluctuations in the dollar exchange rate. However, significant reductions beyond current levels are constrained by the economic realities of the oil and gas industry.